24/04/2018 - Pound Falls to One Month Low

GBP

Sterling fell to a one-month low on Monday as the dollar rebounded across the board thanks to firmer U.S. Treasury yields while governor Mark Carney’s comments last week raised doubts on the likelihood of an interest rate increase next month. Weaker-than-expected wage growth and inflation, and comments by Carney that the data was “mixed” hit the currency hard, sending it towards its biggest weekly loss in two months as investors rushed to price in the possibility the BoE could delay raising rates until later in the year. Expectations of a rate hike at a May 10. policy meeting is now less than 50 percent after being more than 80 percent a couple of weeks ago.

Mark Carney cautioned that politics could have an impact on sterling this week if a cross-party and non-binding technical vote on Brexit on Thursday threatened Prime Minister Theresa May’s leadership .Britain expressed confidence on Friday that no hard border with Ireland would return following Brexit, but European Union negotiators have dismissed a proposal by Britain on how to ensure goods would flow freely after it quits the EU.

USD

The U.S. dollar rallied to a seven-week high on Monday as investors bought the greenback on the rise in the 10-year U.S. Treasury yields. The 10-year yield hit its highest in over four years at 2.998 percent, driven by worries about the growing supply of government debt and accelerating inflation as oil and commodity prices climb.

The strong dollar also reflected an improved outlook on trade. As U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease trade tensions between the world’s two largest economies.